contract law essay

Every contract has five essential elements

Firstly in this question we have to define what is a contract. We would define a contract as a legally enforceable agreement between two or more parties with mutual obligations. These can be oral, written or inferred from the conduct of the parties. Governed by the fact that all contracts must be permissible by law and comply with relevant formalities. There are a number of elements to a contract. Every contract has five essential elements and these are the elements of a contract.

Offer

Acceptance

Consideration

Capacity

Intention

In this case we assume the contract to be permissible by law and compliant with all relevent formalities. We can also discount Capacity, Intention and Consideration as irrelevent issues. There is nothing to indicate that any of the parties do not have the capacity to sign a contract. Intention is presumed in commercial contracts. Consideration is also shown in this context by the offer to pay a price of €45 per chip.

An offer has been made following an invitation to treat in the advertisment. An invitation to treat would be defined as an invitation to another party to make an offer to contract. In this case the invitation to treat is the advertisment taken out by Draper in the computer trade magazine.

At this point Draper recieves enquiries from Sterling Computers PLC and Cooper Computers PLC. Draper responds offering the 10,000 chips at €50 per chip. This is Drapers offer to both parties. This offer was subsequently rejected. An offer can be rejected via 5 methods detailed below.

Revocation

Passing of Reasonable Time

Counter Offer

Rejection

Death

Both firms in this case respond with a 'counter offer' of €45 per chip. A counter offer is not an outright rejection of the original offer but an offer made in response to a previous offer by the other party during negotiation. Making a counter offer automatically rejects the prior offer, and requires an acceptance under the terms of the counter offer or they will be no contract.

Draper has rejected the counter offer and responded with a counter offer himself at the original price of €50 per chip.

The next question we will have to ask is regarding acceptance. At this pont one of the parties Sterling Computers PLC has indicated acceptance via a order form. The laws of acceptance state that acceptance should be in the form of which the original offer was recieved and that it should be clear with silence not considered acceptance. An example of this would be of someone asking for a cup of tea, and recieving the response to their offer in writing. In this case the counter offer from Draper was made in writing and accepted in writing and thus meets the criteria as being the most probable method of communication of acceptance. Draper is reasonable to believe that acceptance is both valid and true.

All contracts can be subject to vitiating factors, these are external factors which can lead to the court explicitly voiding the contract or giving the parties the chance to withdraw from the contract.

The main vitiating factors in a contract are

Mistake

Misrepresentation

Duress & Undue Influence

Illegality – Statuory and Common Law.

We can straight away rule out Illegality and Duress & Undue Influence, their is nothing to possibly suggest that Draper has done anything illegal or pressurised any parties to contract. Misrepresentation is defined as the false statement of material facts that induces the creation of a contract again this is not applicable here.

While this mistake is a vitiating factor I don't believe this mistake should invalidate the contract and would invoke the principal of Cavaet Emptor, particularly in a commercial contract. The representitive on behalf of Sterling should have been aware of the price on the order form. Despite the fact that Sterling had accepted the offer, he is now refusing to pay €50 per chip refusing to go any higher then his original €45 offer.

Draper would be in a position to sue Sterling for breach of contract, even with the mistake made by Sterling's representitive the contract is still valid. Draper though has to look at his other potential customer Coopers Computers PLC

Coopers Computers PLC had initially failed to respond to the counter offer from Draper only responding after the mistaken acceptance from Sterling. From the initial invitation to treat Draper could consider a reasonable amount of time to have passed between him issuing his counter offer to Cooper and the acceptance by Cooper of his counter offer. While no strict time line was put in place I believe that if Draper could accept the offer from Sterling and supply the goods to Sterling a significant enough time period to have taken place. I don't believe any breach of contract has occurred here.

Sterling Computers PLC though have importantly indicated acceptance of the offer and Draper would have had no reason to believe this acceptance to be in error. Importantly as well is that Draper has already supplied computer chips to Sterling and he would be unlikely at this stage to be able to mitigate his losses and sell them instead to Coopers who would have paid the agreed price.

With Pryce Computers PLC, again he has responded to the original invitation to treat from Draper. He has responded with an offer to Draper, Draper is in no position to accept the offer due to an inability to fulfil the terms of the contract. Draper has no legal requirement to contract in this case and Pryce would have no case in suing for breach of contract as no contract has been agreed between the two parties. Pryce is incorrect in the belief that an Invitation to treat, represents a contract. Draper has no responsibility to Pryce and thus can not be sued for breach of contract.

Part B: Law Assignment

I am a legal representative, and Campbell has come to me seeking my advice on what the potential outcomes of his case would be if he were to sue Olson Construction for breach of contract. Olson Construction breached the contract by not building the pool to the dimensions given in the contract. In the contract it states that Campbell wants the swimming pool to be 2 metres deep, 25 metres long, and 10 metres wide. Olson Construction built a pool that was 1.8 metres deep, 25 metres long, and 10 metres wide.

In this report I shall inform Campbell what the different types of contractual discharges are, and which one of them applies to his case. I shall also identify some of the remedies that are available to him. I shall also advise Campbell on what the best course of action I think would be best for him to pursue.

There are four ways in which you can have a contractual discharge. They can be discharged by; (see Appendix)

Discharge by Performance – When both parties have performed their duties.

The performance must be exactly in accordance with the terms and conditions of the contract. If a person does not fulfil the terms and conditions of the contract then they may not be able to sue for the money owed to them.

Discharge by Agreement of both parties – A contract can be created by an agreement, and can also be terminated by an agreement.

Discharge by Frustration – When something happens which renders the contract fundamentally different from the contract originally entered into by the parties during the term of the contract, which is not the fault of either party, it may be discharged by frustration. An example of this is where the subject matter of the contract has been damaged and makes the contract impossible to complete.

Discharge by Breach – Where a party does not fulfil or may break a term of the contract. There are two types of breach; Actual Breach and Anticipatory Breach.

Actual Breach; The injured party can treat the contract as terminated if the other party to the contract breaks a fundamental term.

Anticipatory Breach; One party can breach the contract by stating that they are unable or unwilling to perform their side of the contract. The injured party can then treat the contract as discharged and claim damages for losses suffered.

In this situation, I believe that this type of contractual discharge would be by an Actual Breach of the contract. Olson Construction is the party that breached the terms of the contract. A term is an essential condition of the contract. A breach of this fundamental condition will be a breach of the contract. In this case, Olson Construction breached the terms of the contract by not building the pool to the exact dimensions that were stated in the contract. Olson Construction built a pool that was only 1.8 metres deep, when the contract stated that Campbell wanted the pool to be 2.0 metres deep. Campbell wanted the pool to be the same size as a standard Olympic swimming pool as he was going to start training for the next Olympics.

One of the potential remedies for this case could be, Damages. Firstly, Campbell suffered non-financial loss as a result of the pool not being ready. Campbell wasn't able to commence training as he had originally planned. This delay could have resulted in incidental expenses and also physical inconvenience, as Campbell would have to find somewhere else to train as his pool was not ready.

I would advise Campbell of another potential remedy that may also be available to him which is Specific Performance. Specific Performance is where the court will order a party to perform their duties under the contract. As an equitable remedy it would only be granted where the plaintiff had acted fairly. In this case the court might order Olson Construction to complete the pool to the specifications in the contract.

Another type of remedy that could be granted in this case could be a Mandatory Injunction. A Mandatory Injunction is where the court will order a party to perform a definite act. So in this case the court could force Olson Construction to complete the pool, or adjust the pool to the specific dimensions given within the contract.

I believe that Quantum Meruit would not apply here as Campbell would have to get a new contractor in to redo the pool and it would cost more than the original price that was set in the contract with Olson Construction, so it would be like paying for two pools, when he is only getting one.

I would advise Campbell that I think the best way to go would be to sue Olson Construction by claiming for Specific Performance and Damages as legal remedies. These two remedies would be most likely to have a positive outcome for Campbell. Alternatively Campbell could sue for a Mandatory Injunction. I don't believe a Mandatory Injunction would be upheld in a court due to the costs of reinstatement being out of proportion to any actual benefit. This is be referenced in the case Ruxley Electronics and Construction Ltd v Forsyth (1995).

Appendix

Contractual Discharge

By Performance – When both parties have performed their duties. The performance must be exactly in accordance with the terms and conditions of the contract. If the person does not fulfil the terms and conditions of the contract may not be able to sue for the money owed.

By Agreement – A contract can be created by an agreement, and also can be terminated by an agreement. It maybe discharged by;

Conditions contained in the contract – The contract can be discharged following an agreed event occurring.

Waiver of the contract – If the contract hasn't been put into operation yet by either party, you can terminate the contract.

Release of one of the parties – If one of the parties has fulfilled their part of the contract, they are able to release the other party from doing theirs.

Novation of the old contract – Where neither parties has performance the contract and can substitute this contract with another one. An example of this would be to transfer an of a parties duties to a third party.

By Frustration – is when a something happens during the term of the contract, which is not the fault of either party. The frustration may be caused by;

Destruction of the subject matter of the contact – Damages on a construction site, a wall knocked over when neither party were there.

Non occurrence of an event upon which the contract is dependant – Ordering material and they not being delivered

Incapacity to perform a contract for personal services – Unable to fulfil a task due to a medical condition.

Government intervention or subsequent illegality – Where a part of the contract maybe deemed illegal in the eyes of the law.

By Breach – Where a party does not fulfil or may break a term of the contract. The contract may be terminated by;

Actual Breach – If a party breaks a condition in the contract, the damaged may be able to reject the contract after the breach been made.

Anticipatory Breach – Where a party breach's the conditions of the contract because they cannot perform there duties within the current conditions.

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